Verizon CEO Boosts Broadband Prospects

1/09/2006 5:35 AM Eastern

By: Karen Brown

2006 will be a banner year for Verizon Communications Inc.’s broadband services, including its Verizon FiOS TV fiber-to-the-home initiative, CEO Ivan Seidenberg told a group of investors at a Citigroup Inc. conference Monday in Phoenix.

In particular, Seidenberg told investors he was encouraged by the uptake for FiOS TV service since its launch in its first market in Keller, Texas. Since debuting in late September, the service has hit market penetration of 20%, he said.

Service economics also are improving. While giving no details, Seidenberg told investors the cost per home to roll out FiOS TV dropped in 2005, and 2006 should be the peak year for Verizon’s wireline capital spending, with the focus shifting from traditional copper infrastructure to the next-generation fiber-optic and Internet-protocol systems.

So far, Verizon’s fiber-optic network passes 3 million homes and businesses in 16 states, with plans to double the customers-passed count to 6 million this year. That represents about 20% of the potential customer premises within Verizon’s territory.

The regional Bell operating company has a goal to eventually extend fiber services to 60% of homes and businesses.

Meanwhile, Verizon completed its $8.5 billion acquisition of MCI Inc. last week, and with that, the company expects to boost its net value by $8 billion in incremental revenues and operational savings, up from the original $7 billion net-value-increase estimate.

But Verizon will have to spend about $1 billion in gear and systems this year to knit together the two companies’ networks, as well as an additional $1.6 billion-$1.9 billion in capital through 2008. That expense is, however, lower than original estimates of approximately $1 billion-$1.5 billion in expenses and $2 billion in capital.

Seidenberg also said he sees more growth in store for Verizon Wireless, which is jointly owned by Verizon and European phone operator Vodafone Group. That growth will be spurred in part by fusing business market assets from Verizon’s acquisition of MCI with Verizon Wireless’ growing broadband “Evolution-Data Optimized (EV-DO)” wireless network.